The faltering bond market received some good news on Monday, but it was not enough to offset a continued rise in oil prices, which caused US stocks to fall and cryptocurrencies to give up most of their gains.
Speaking at Harvard University, Federal Reserve Chairman Jerome Powell said the US central bank – for the moment – is looking beyond short-term oil price shocks and focusing on inflation expectations that remain “well anchored.”
His comments helped calm a bond market that had begun to seriously price in the possibility of an imminent Fed rate hike. The 10-year U.S. Treasury yield fell nine basis points on Monday to 4.35%, and the 2-year yield fell eight basis points to 3.83%.
The odds of one or more Fed rate hikes in 2026 fell from 25% to 5% on Friday, according to CME FedWatch.
Considerably higher early Monday, U.S. stocks, however, gave back those gains, with the Nasdaq closing down 0.75% and the S&P 500 down 0.4%. bitcoin also gave up early gains, retreating to $66,500, roughly unchanged in the past 24 hours.
What hurt confidence in risk assets was the continued rise in the price of oil. WTI crude oil rose 5.3% on Monday to just $105 per barrel. While WTI has traded above $100 since the war with Iran broke out, it had not closed above that level since 2022.
“Maybe eventually we’ll be faced with the question of what to do here,” Powell said. “We’re not really dealing with it yet because we don’t know what the economic effects will be.”
